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As companies merge, acquire, restructure and spin off subsidiaries, it's hard to keep track of the hierarchies and relationships among legal entities. Also, companies can now have multiple relationships with one entity -- perhaps recognized as a customer in one context, a supplier in another, and a partner in a third. And, in today's business climate, those relationships can all change rapidly. Using customer data integration (CDI) tools to understand organizational hierarchies can help sales, marketing, finance reporting, risk analysis and compliance efforts, according to John Radcliffe, research vice president with Stamford, Conn.-based Gartner Inc. It's especially important in business-to-business (B2B) relationships, he said.

"If you don't have proper information about your business customer, then you're in no position to manage the relationship," Radcliffe said. "You don't know the totality of the business you're doing together. They're complex and you're complex, and you're fragmented on both sides."

Companies have tried to solve the problem by building homegrown systems or relying on hierarchy data from a third-party provider such as The Dun & Bradstreet Corp., based in Short Hills, N.J. Now, many companies, including Microsoft, are using CDI tools to better understand organizational hierarchies and relationships.

Microsoft's unique challenges

Microsoft has a massive infrastructure, a variety of products and services, and approximately 75 million B2B and 300 million business-to-consumer (B2C) relationships across many countries. So, the technology giant considered hierarchy management a critical capability when it evaluated tools for its internal CDI project, according to Richard Clements, senior director of product marketing with Chicago-based CDI vendor Initiate Systems Inc. Microsoft chose Initiate's Identity Hub because of the performance and scalability of its newly developed B2B hierarchy management capabilities.

"We evaluated a number of other options, and Initiate Systems was the best CDI solution that could provide the B2B hierarchy management we needed and meet our accuracy, performance and scalability requirements," said Tony Ulkekul, senior director of sales operations at Microsoft. "Initiate's advanced matching technology, combined with its ability to integrate with enterprise-class Microsoft products, created a global solution for our CDI needs."

One of Microsoft's unique challenges is rationalizing multiple, potentially differing hierarchies, according to Initiate's Clements. Microsoft gets its hierarchy information primarily from Dun & Bradstreet and augments it with other third-party and internal information, he said. When hierarchies from multiple sources are different, Initiate uses matching algorithms to automatically determine the correct hierarchy. Then, Microsoft's data stewards can use a tool developed by Initiate to review the hierarchies and manually correct the information. Microsoft is starting with B2B relationships, Clements said, but plans to extend the capability to B2C relationships.

Microsoft rolled out Initiate's system in April, including the first version of its B2B organizational hierarchy management feature, Clements said. Initiate plans to make the capability generally available in September.

Approaches to organizational hierarchy management

Hierarchy management is not unique to Initiate's tool. Both Gartner and Forrester evaluate the capability during CDI studies, and several vendors offer it, according to analysts at both firms.

Some companies have also tried -- with limited success -- to custom-build hierarchy management systems, according to Jill Dyche, partner and co-founder of Baseline Consulting Inc. and author of Customer Data Integration: Reaching a Single Version of the Truth (Wiley 2006).

"[Hierarchy management] is harder than people think. The logic required not only to build that code, but more importantly to maintain it, is huge," Dyche said.

The good news for customers is that CDI vendors are addressing the issue, she said.

Relationship hierarchy mapping and management capabilities are important features of a CDI tool, according to R. "Ray" Wang, senior analyst with Cambridge, Mass.-based Forrester Research Inc. For a fall 2006 CDI study, Wang is evaluating vendors' capabilities in this area, including how tools handle B2B relationships, how they support "house-holding" or modeling individual relationships, and how they manage overlapping hierarchies -- that is, when an individual belongs to multiple hierarchies, perhaps at home, at work and at another organization.

"The three key features to look for are the ability to model complex relationships, the ability to handle overlapping hierarchies, and having a visual hierarchy management tool, so it's easy to administer," Wang said.

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